Are the effects of fiscal policy really nonlinear? A note

Based on a panel data model, Giavazzi, Jappelli and Pagano (2000, European Economic Review 44, 1259–1289) recently found evidence that national saving in OECD countries responds nonlinearly to fiscal policy, the nonlinearity being associated with the size and persistence of the fiscal impulse. The existence of this nonlinearity would have important policy implications because it implies that the short-run costs of a fiscal consolidation program are lower the larger and more persistent it is. However, this paper shows that their finding is not robust, one reason being the inadequacy of the slope homogeneity assumption implicit in their panel model and another reason being their reliance on an implausibly large number of episodes of large and persistent fiscal impulses.     

THE REDISTRIBUTIVE IMPACT OF ALTERNATIVE INCOME MAINTENANCE SCHEMES: A MICROSIMULATION STUDY USING SWISS DATA

Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62 percent is required to make it viable. Aggregate work hours are reduced by approximately 10 percent and average disposable income falls by 9.3 percent under such circumstances. A participation income restricted to adults in employment and covering 50 percent of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland.     

„Entscheidend ist am Ende,wie zufrieden der Bund als Kunde ist!“

Praxis / Artikel

„Entscheidend ist am Ende, wie zufrieden der Bund als Kunde ist!“ Interview mit Dr. Carsten Lehr, Leiter des Bereichs Finanzen, Controlling & Administration der Bundesrepublik Deutschland — Finanzagentur GmbH     

On the optimal portfolio for the exponential utility maximization: remarks to the six-author paper

This note contains ramifications of results of Delbaen et al. (2002). Assuming that the price process is locally bounded and admits an equivalent local martingale measure with finite entropy, we show, without further assumption, that in the case of exponential utility the optimal portfolio process is a martingale with respect to each local martingale measure with finite entropy. Moreover, the optimal value always can be attained on a sequence of uniformly bounded portfolios.     

A measure of total factor productivity with biased technological change

The paper presents a new measure of total factor productivity (TFP) that also takes into account the effect of biased technological change. With this methodology, we can distinguish the effects resulting from the introduction of neutral or biased technological change on TFP, called neutral factor productivity and biased factor productivity (BFP), respectively. The new measure of TFP also holds in extreme cases where only the effect of neutral/biased technological change is presented. In particular, the BFP component increases (decreases) when the productivity of the cheaper (more expensive) factor increases. Moreover, the TFP holds up to the modification of both units of measure and to the costs of factors. Finally, the intensity of the BFP is independent of the direction of the technological change.     

Entrepreneurship and the systemic consequences of epidemics: A literature review and emerging model

The Covid-19 epidemic is a global challenge requiring adequate public and private responses to overcome the emergency, shape new development trajectories, and prepare for future outbreaks. As socioeconomic turning points, epidemics imply an entrepreneurial response in which not only managers and entrepreneurs, but also policymakers, health professionals, and civil society as a whole are active participants. Using the PRISMA methodology, we provide a comprehensive review of the complex interactions between entrepreneurship and epidemics over time. Applying a combined Kirznerian-Schumpeterian theoretical framework, we find that, in the short term, epidemics trigger a wave of Kirznerian entrepreneurship aimed at reducing the uncertainty generated directly and indirectly by the medical emergency. In the long term, as medical uncertainty abates, Schumpeterian entrepreneurship can contribute to transforming the post-crisis environment, either supporting or undermining the public reaction to the crisis and determining the path of institutionalization, in the process of defining a new normal. Thus, epidemics could lead to unpredictable socioeconomic and technological improvements, but also to highly undesirable outcomes. The construction of a satisfactory new normal requires the integration of entrepreneurial capabilities within the public sector and an explicit policy of cooperation with the private sector. Therefore, as the short-term phase of the Covid-19 pandemic draws to a close, policymakers must shift their focus away from restrictions and obligations towards a collaborative framework supportive of private entrepreneurial efforts.